401k Self Directed Retirement Plan: How to Achieve Real Diversification of Your Solo 401k

401k self directed

401k self directed

To achieve true diversification in your retirement account means you should not just place your savings into a single investment. But how are you supposed to do that if your regular retirement plan wouldn’t allow you?  The answer is pretty simple— set up a Solo 401k self directed plan. If you have an existing 401k or other types of retirement plan, a rollover to a self directed solo 401k is possible.

The rule of the thumb in retirement diversification is to “not put all of your eggs in one basket”— as simple as that and regardless of the kind of investments you choose to pursue— stocks, mutual funds, bonds, private business, or real estate. Don’t take risk on your retirement money on a single asset. With the self-directed plan you can invest your funds in private businesses, gold, precious metals, tax deeds and tax liens, loans, and real estate. Imagine the numerous options you can select from. In this way, your money is not stuck in the stock market where instability can put your retirement savings at risk.

401k self directed plan can help you achieve the kind of diversification you need for your retirement savings, whether it is about investment diversification or tax diversification

Diversifying your account is not just about investment options but can also be about tax diversification. Although the Solo 401k contribution is originally pre-taxed, you can still make after tax contribution if you want to. Self-directed Solo 401k with its Roth sub account feature allows you to put money on an after tax basis. This gives you the ability to receive qualified distributions tax free when you reach the age of retirement. Withdrawal of the amount of contribution from the Roth sub-account prior to retirement age is also tax free and penalty free.

You can make contributions on both pre-tax and post-tax accounts of your Solo 401k self directed plan. Tax diversification matters a lot especially for those who feel that they will be on a higher tax bracket when they retire.